Artificial Intelligence (AI) is becoming an integral part of the banking industry, with the Bank of America (BoA) pointing out numerous benefits for financial institutions. According to BoA, the integration of AI with existing banking processes is expected to bring forth a range of positives for the industry. Automation is highlighted as the most apparent application of machine learning (ML) tools in finance, which can significantly improve productivity and efficiency.
However, BoA analysts, led by Richard Thomas, caution that despite the upsides of AI use, entities in the banking space will have to proceed cautiously. The bank emphasizes that while greater automation has the potential to improve productivity and enhance bank returns, there are also vulnerabilities around the broad use of AI in banks. Privacy and cybersecurity risks associated with integration with AI tools are a major concern, with potential exposure of customers’ information to bad actors.
The democratization of AI and the lower barriers to threat actors are significant areas of concern for banks to grapple with in their attempts to integrate AI. Many banks have already started incorporating AI into their offerings to detect financial anomalies, assess credit risks, and predict customer behavior. Several financial institutions have adopted AI-powered tools to crack down on financial crime.
Despite the initial forays in adoption, BoA analysts say the prospect of significant revenue growth from AI is “less tangible,” but in a decade, the financial windfall could contribute significantly to banks’ earnings. While banks are urged to proceed cautiously with AI, BoA’s report calls on regulators to ensure proper guardrails will protect the financial industry from existential AI risks.
In Southeast Asia, banking regulators are urging commercial banks in the region to adopt AI for improved service delivery. The Reserve Bank of India (RBI) has called for local lenders to leverage AI to reduce systemic banking risks. Meanwhile, the Monetary Authority of Singapore (MAS) calls for a measured approach to AI adoption after its previous experiences with digital currency.
“We want to play a long game in this space,” said one MAS executive on AI. “We want to ensure whatever AI we adopt or promote, it stays for a long period of time. We have learned a lot of lessons in the whole digital currency space. If you rush yourself very fast, you may see bad actors coming very quickly.”
In conclusion, AI is revolutionizing the way banking is carried out, offering numerous benefits including automation, improved productivity, and enhanced service delivery. However, caution must be exercised to mitigate privacy and cybersecurity risks associated with the integration of AI tools. Regulators and financial institutions alike must work together to ensure the responsible and sustainable adoption of AI in the banking industry.
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